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Investors Better Off With Cash-Value Life Insurance

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Don’t you see all the red flags telling you the investment markets are in danger?

Is there some reason you think relying on Wall Street sales hype and Federal Reserve hi-jinks are better than accepting the actuality that your future financial security is increasingly at risk?

Isn’t there a better way to deal with the anxiety of financial insecurity and exposure to unrelenting risk?

You think you only have two investment alternatives—trading or investing.

Trading is a means to make money by frequently buying and selling stocks, bonds, commodities, and other financial instruments with the goal of generating returns that will outperform the strategy of merely buying and holding various investments for a long period of time.

Wall Street likes you to think that they have some sort of secret sauce they call their trading style which gives them an edge.  Traders are looking to the market’s volatility to give them the opportunity to enter and exit positions and make, hopefully, more frequent profits.

These trading styles do not include the ability for investment profits to compound on a tax free basis. Trading profits are subject to tax and inflation.

Wall Street has one incentive making money off buying and selling for your account. The investor takes all the risks of loss.

But Wall Street wins both on the buy side and the sell side. And every way in between as well.

Wall Street promises the investor nothing, and that is what investors get.

They make money on you whether the economy is up, down, or sideways.

If you were paying attention to what Chairperson of the Fed, Janet Yellen, recently said a few days ago at the Economic Club in New York, the hairs on your head should have stood straight up.

She clearly was saying two things:

  • The US and the global economy are in deep trouble.
  • The Fed’s ability to use conventional monetary policy to respond to economic disturbances is asymmetric. I understand this to mean that the Fed does not understand what to do and has no way of doing it if they did know.

What is the solution for someone who wants a secure financial future in what looks to be unrelentingly precarious and unpredictable economic circumstances?

The answer for many will be a third investment alternative of acquiring a cash value life insurance contract.

While neither Wall Street nor the Fed make any promises, life insurance companies make financial promises and they put them into a written contract.

Insurance companies have a different internal financial incentive imposed on them by their regulators than do the Wall Street hustlers. Insurance company regulators make sure the insurance companies are always solvent.

In this last financial near collapse some 370 banks went bankrupt, but not one insurance company. Even AIG’s insurance operations were solvent. The big banks only avoided bankruptcy because the Fed put up the billions of dollars to cover their buddies’ tails. Call it mutual job security.

Insurance companies come in two forms. Mutual insurance companies are owned by their policy owners. Profits from company operations inure to the policy owners not outside shareholders. Stock companies also watch costs closely so they can compete in the marketplace. All insurance companies are subject to close regulatory oversight of costs, expenses and fees.

Insurance companies benefit from a form of the law of large numbers. They invest the money they receive as premium with the goal to pay out for future financial obligations spread out among a vast number of people and over a long period. Insurance companies can tax efficiently maximize the value of a buy and hold investment strategy.

Insurance companies can provide minimum guarantees of investment returns, and some provide a contract provision that adjust payouts for inflation.

The investment earnings on the insurance company’s reserves set aside to pay out future policy obligations are not currently taxed. Consequently, the investment returns compound on a tax free basis. Death benefits are paid out tax free. And loans can be made from the policy contract’s cash value tax free. These are benefits for policy owners that Wall Street can only fantasize about being able to offer to investors.

Given the current economic climate, those investors who want to be assured of having a safe and secure financial future need an alternative to just trusting the Wall Street casino to trade or invest their money.

For their peace of mind, as well as formalized retirement and estate planning, many investors will want to consider putting their nest egg money into cash value life insurance.

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